Monday December 1, 2008
Navivest

A simple law of gravity states that what goes up must come down and that applies to stocks as well. Last week, as stocks rose two days in a row, then three, in a very challenging economic environment, we were of the view that the moves did not make sense.

Consequentially, we recommended that subscribers to our Options Capitalist and Navivest Equity Trader take short positions. Those positions paid off rather well today as the stock market took a major tumble.

Partly responsible for today’s action, was possibly the chickens coming home to roost. Last week, the stock market ignored dismal economic data, including poor housing, consumer confidence and jobs numbers.

Adding fuel to the fire, we also got news today that the U.S. economy, according to the National Bureau of Economic Research, has in fact been in a recession.

To the extent that the economy had not had prior back-to-back sequential quarterly declines, the government refused to acknowledge this fact

The National Bureau of Economic Research on the other hand, does not use the official definition of a recession. It instead looks for broad-based declines in economic activity and according to its definition; we have been in a recession since December 2007.

There were probably quite a few stock market participants who got caught in a bear market trap today. After watching stocks rally for four days and worried they were missing out, they probably jumped in on Friday only to get beat up today.

On Wednesday, we posted an article on this blog that said the trade for that day was to exit long positions if you had been lucky enough to get in between the prior Friday and Tuesday, and to just sit out the rest of the week, because of Thanksgiving. As aforementioned, we also put our subscribers in short positions.

The bear market action today was very aggressive. At 3PM, there were four stocks among the S&P 500 stocks that were up, although two were up less than $0.10 and one was up less than $0.50. At the close, only one of those Rohm and Hass (ROH) was still up.

By the end of the day, the Dow had shed 7.7%, the Nasdaq was down 8.95% and the S&P 500 was down 8.93%.

Tags: Recession  Bear Market  Dow Jones  Nasdaq  S&P 500

Friday November 21, 2008
Navivest

It might still be too early to call, but all indications are that we will finally get that stock market rebound that we have been looking for, for three days now on this blog.

Stocks are up in Europe, oil and gold and trading higher, we got good news from Dell overnight and quite frankly, while this IS a bear market and there is probably more downside, in the near-term, we are in very oversold territory.

Indications are that the Dow will open up about 200+ points. We do have a few hours before the open, but we should get a nice pop at the open.

If that happens, with stocks like Citigroup ( C) now trading below $5, we will see investors buying and short sellers covering, so we should see a meaningful rally.

And if we do get the rally, it will be a free for all, with most stocks climbing on the day. So it won’t be a question of which stocks to pick, it will be a question of whether we can still enter, since stocks will open higher and which stocks will give us the most bang for our trading buck.

Since we can expect short covering on a rally which means stocks will go even higher, yes, we can probably still enter at the open, and we like commodity stocks for today. Your Potash (POT), Agrium (AGU), Mosaic (MOS) and the financials.

We also like the instruments that cover the market as a whole such as QQQQ, SPY and DIA.

If we are so lucky, that we are only up moderately at the open, use that as an opportunity to get in at those prices instead of thinking we could end up down again. We can’t keep losing 5% a day. In the next couple days, we will get a huge rally in stocks.

Tags: Stock Market  Stock Rally  Dow  Nasdaq

Thursday November 20, 2008
Navivest

The stock market is trading in and out of positive territory in late AM trading after opening to the downside with losses in all the major indices. While it is a bit too early to determine whether we will end up the day to the upside, we are looking for stocks to rebound if not today, then tomorrow.

Traders should start positioning themselves now by taking long positions. A rally would be broad-based, but we would just place bets on the markets overall, by buying the major indices as represented by QQQQ, SPY and DIA, which is a bet on the Dow 30 stocks.

For those looking to buy the stocks that are showing strength in a weak market, Boeing (BA), Verizon (VZ) and Walmart (WMT) are all up over a dollar, with 3% plus gains.

Tags: Stocks

Wednesday November 19, 2008
Navivest

With the rout we saw in the stock market today, that had the Dow, Nasdaq and S&P 500 shed 5.07, 6.53 and 6.12% respectively, we are hoping that the rebound that we have been looking for, will come tomorrow.

Today’s action should be a watershed that will hopefully give us a temporary bottom that we can bounce off of tomorrow.

From a technical and psychological standpoint, we do need to see some buying and a strong move to the upside tomorrow. We are already trading at levels we haven’t seen in five years and further violations of long-term support areas could result in further significant losses in shareholder wealth as those who for whatever reasons are still holding on to their stocks, decide to dump them.

If we have any buying in early trading, we would recommend getting in, so as not to miss a technical rally.

Tags: Technical Analysis  Stock Trading  Dow Nasdaq

Thursday November 6, 2008
Navivest

With the drop in stocks today, the major stock market indices have lost about 10% of their value in just two days.

Today, the Dow fell 443.48 points (4.85%), Nasdaq fell 72.94 points (4.34%) and the S&P 500 fell 47.89 (5.03%).

The losses in the past two trading days in the Dow and the S&P 500 are the largest since October 1987. This erodes more than 50% of the gains that we realized since stocks rebounded from a five-year low that was hit 11 days ago on October 27.

Fueling the drop was news from retailers, which showed that retail sales in October was the worst in 39 years. Walmart was one of the few exceptions. It reported that its sales for October rose 2.4%. This bested even the company’s own internal forecasts. If fuel sales are factored in, sales rose 2.5%, when compared to October 2007.

The good news for traders, is that the big drop in stock sets us up for another near-term bounce, the disastrous unemployment rate numbers that we will be getting tomorrow notwithstanding.

The biggest point decliner in the Dow today was Chevron (CVX), which shed $4.77 (6.37%) to close at $70.11. This was a reflection in the big drop we saw in oil prices today, which continue to fall on concerns that a weakening global economy will lower demand. Crude oil for December delivery dropped $4.53 or 6.9%, to close at $60.77.

Disney lost $1.42 during regular trading to close at $22.81. The shares are further trending lower in after hours trading, after the company reported that its fourth quarter net income fell 13%. Partly to blame was losses attributed to the bankruptcy of Lehman Brothers.

The company is expecting things to worsen consumer spending slows. According to Robert Iger, Disney’s CEO, “Consumer confidence is the lowest we’ve seen in over three decades, and even the best product out there is feeling the effect,”

Tags: Disney Earnings  Economy

Tuesday October 28, 2008
Navivest

Stocks put in a phenomenal day today, with the Dow, Nasdaq and S&P 500 surging 10.88%, 9.53% and 10.79% respectively. This is the second biggest point gain day on record. To put it in perspective, we saw percentage gains in one day that Wall Street would be satisfied with on an annual basis. The Dow rose 889.35points, the Nasdaq, 143.57 points and the S&P 500, 91.59 points.

This was despite the fact that we got the Consumer Confidence report for October that showed a dismal consumer confidence reading of 38, a full 14 points below the forecast of 52.

The Federal Reserve is meeting today and tomorrow and on Wednesday afternoon, will announce their latest interest rate decision. Wall Street is expecting that we will get a rate cut and that probably played into the big rally that we got today.

The rally was as broad-based as they come, with just about every industry group seeing strength. Every stock in the Dow Jones Industrial Average, was up and only 6 stocks in the S&P 500 were down.

Some of the biggest point gainers in the Dow that helped propel the index to an 889 point gain, include Exxon (XOM) $74.86 +8.77, Walmart (WMT) $55.17 +5.50, United Technologies (UTX) $51.29 +6.11, IBM (IBM) $87.28 +7.62, Boeing (BA) $48.91 +6.55 and Chevron (CVX) $70.02 +8.31.

The biggest percentage gainer was badly beaten down Alcoa (AA), which climbed $1.74, for a 19.25% gain on the day. In addition to Alcoa (AA), there were 20 other stocks that climbed over 10% on the day.

Tags: Stock Market  Stocks  Stocks Rally

Wednesday October 22, 2008
Navivest

Concerns about a deteriorating global economy, caused a broad-based sell-off in stocks on Wednesday that saw the Dow, Nasdaq and S&P 500 lose 5.69%, 4.77% and 6.10% respectively.

Adding fuel to fire was the fact that companies that are now reporting their earnings are giving weakened forward guidance, confirming the fact that the economy is in fact slowing.

Shares of Amazon (AMZN) are falling about 7 points in after hours trading, after the company reported its 2008 third quarter earnings. The company actually beat Wall Street estimates by two cents per share with its $0.27 EPS, but it also said that sales started slowing towards the end of the quarter and expects the slowing to continue into the fourth quarter.

Back in July of this year, Amazon (AMZN) forecasted sales of sales of $19.35 billion to $20.10 billion. However, the company revised that downward yesterday, saying it now expects full year sales for fiscal ’08 to come in at $18.46 billion to $19.46 billion, obviously a result of consumers tightening their belt.

The Dow closed at 8,519.21, down 514.45, the Nasdaq closed at 1,615.75, down 80.93, while the S&P 500 closed at 896.78, down 58.27. Unlike recent days when stocks wildly fluctuated between positive and negative territory and then rallied towards the close, the tone was negative all day.

The Dow opened at 9,027.84, from yesterday’s close of 9,033.66 and by 10:15 AM, we were down 398 points to 8629.44. We got an attempt at a rally, that saw the Dow climb back up to 8796 at 10:55 AM, but the index down trended from there, falling to 8619 at 1:35 PM.

From there, we traded in a roughly 104 point range until about 3 PM, when things got even uglier, and the Dow lost another 320 points to hit an intra-day low of 8,335.30. We then saw some buying that pushed the Dow to 8,519.21, for the loss on the day, of 514.45 points.

Tags: Stock Market  Dow

October 10/15/08
Navivest

It was another ugly day for stocks across the board that saw the S&P 500 sell off to the tune of 9.03%, the Dow shed 7.87% and the Nasdaq saw a loss of 8.47%.

On Monday 10/13/08 when the stock market saw that amazing rally on the EU and U.S. government plan to buy stakes in banks, the Dow opened at 8,462.42. With today’s close of 8,577.91, the Dow is now only a hundred and fifteen points above the open on Monday. So we’ve in effect just about lost all those gains.

The concern was the economy, both here in the U.S and abroad. We saw oil for November delivery lose $4.80 today to close at $73.83 as OPEC warned that demand is slowing. As a result, we saw energy and commodity stocks get battered. We also got a report that showed car sales in China slowed last month.

This morning, the Commerce Department released retail sales report for September that showed fell much worse than was forecasted. The actual drop was 1.2%, while economists had been looking for a drop of 0.7%. The drop in August was only 0.3%.

As things get worse, we can look for stocks to continue moving to the downside. However, we will probably see a very volatile stock market with wild swings in the near term. After today’s 700-point plus drop, we are now looking for a rebound over the next day or so and we are positioning subscribers to our Options Capitalist accordingly.

Tags: Stock Market  Dow Jones  Nasdaq  S&P 500

Stocks posted among their best one day gain today, on word that the government is putting together a plan to buy stakes in some banks, as a way of help instilling confidence again into the banking system.

This follows a similar but more concentrated U.K. government plan to buy equity stakes to the tune of $37 billion, in Royal Bank of Scotland in which it will take a more than 50% stake, and Lloyds TSB and HBOS which are in the process of merging. The U.K government will take a 40% stake in the combined Lloyds TSB and HBOS. European Union central bankers also announced similar plans to inject capital into their banking systems.

The Dow Jones industrial average was up 936 points (11.08%) finishing the day at 936.42. This was the largest point gain ever for the Dow and the fourth largest percentage gain.

The Nasdaq was up 194.74 for 11.81%, closing at 1,844.25 and the S&P 500 closed at 1,003.35 or 11.58%, for a gain of 104.13. This was the largest point gain ever for the index, and the largest percentage gain since 1933.

Stocks were also up on news that Morgan Stanley (MS) closed its deal with Mitsubishi UFJ Financial (MTU), in which Mitsubishi (MTU) took a 21% stake in Morgan Stanley (MS). Wall Street was worried the deal might not go through, after Morgan Stanley’s stock fell over 60% since the deal was first announced on September 22nd, 2008.

Tags: Dow Jones  Nasdaq  S&P 500  Morgan Stanley

The stock market fell to four-year lows in Thursday 10/08/08 trading, as concerns over the economy continues to spread and government efforts to help put a floor under the stumbling economy seem to not be working.

The stock market loss was broad-based, with all the major indices falling to five year lows.

The Dow closed down 678.91 points (7.3%), to close at 8,579.19, the Nasdaq closed down 95.21 points (5.5%), closing at 1,645.12 and the S&P 500 closed down 75.02 points (7.6%)to close at 909.92.

The list of casualties was extensive. Among the notable losers, Exxon Mobil saw its biggest drop in 21 years, losing 9 points to close at $68 and GM dropped to a 58 year low, losing 31% to close at $4.76.

Incredibly enough, it was exactly one year ago that the Dow hit its all time highs of 14,164.53.

Tags: Stock Market